Skip to content

NISM Certifications · NISM-Series-X-B: Investment Adviser (Level 2) · Miscellaneous Aspects of Retirement Planning

Mr. Rao, aged 58, expects to need Rs 6,00,000 per year (in today's money) for living expenses in retirement. Assume inflation of 5% p.a. and that he retires in 2 years, with the first year's expense incurred at retirement. What is the approximate annual expense in the first year of retirement, rounded to the nearest rupee?

The first year's expense at retirement is Rs 6,61,500. This is found by compounding Rs 6,00,000 at 5% inflation for two years, giving 6,00,000 x 1.1025. Using simple inflation of 10% gives Rs 6,60,000, which ignores compounding.

  1. ARs 6,60,000
  2. BRs 6,00,000
  3. CRs 6,61,500Correct
  4. DRs 6,30,000

Explanation

Expense at retirement = 6,00,000 x (1.05)^2 = 6,00,000 x 1.1025 = Rs 6,61,500. Rs 6,60,000 uses simple interest (10%), and Rs 6,30,000 inflates for only one year.

Did you get it right without looking?

One question tells you little. A timed set on Miscellaneous Aspects of Retirement Planning shows your real accuracy, how long you take and where you lose marks.

Practise Miscellaneous Aspects of Retirement PlanningFree diagnostic mock

More Miscellaneous Aspects of Retirement Planning questions